12.2.22: Audio automatically transcribed by Sonix

12.2.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Money Matters with Mike, with your host, Mike Zaino. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Mike Zaino.

Mike Zaino:
What's up? What's up? What's up? It's Mike Zaino coming to you live from Fort Mill, South Carolina. Happy Saturday, people. What a great day to be alive in these United States of America. Money Matters with Mike is a show that's designed to arm you with information and give you plenty of meat on the bone each and every week. And today we are absolutely bringing it again. On today's show, we'll discuss several ideas on how to improve your financial plan for 2023. Always, I have the distinct honor and privilege of being joined by the one, the only my co-host and producer extraordinaire, Mr. Matt McClure. Matt, how are you doing today?

Producer:
I am doing great, Mike. We were just talking before we went on the air here and I've just about recovered from the Thanksgiving holiday as more than a week after. You know.

Mike Zaino:
Buddy, I tell you, I know. I'm sure you ate some good food. I ate some some good food. I gained £7 over the Thanksgiving week from all of the food that I ate. Luckily, I have dropped all but two of those pounds. But I mean, a £7 gain in one week means that's a lot of food, brother.

Producer:
That really, really is. I'm telling you, I was just about in that same boat with you. My and this is all I'll say about food. But my, my niece has started making these chocolate pecan pies every Thanksgiving and she'll make two of them. She won't just make one. She makes two of them. And so then there's like plenty to eat on, like for the next two or three days. And of course I do. So. So there we go. That's why I'm about to recover that.

Mike Zaino:
That is hilarious. And I noticed you pronounced it pecan, right? And there are so many people out there that pronounce it pecan. And, you know, my wife and I always have a have a little word over that because I grew up calling it pecan, you know, And she's like, no, a pecan is something our ancestors had under the bed that they'd pull out so they wouldn't have to go out in the outhouse at night. So it was funny because I put a post out on social media and it was about half and half, half the people said Pecan, and half the people said pecan, you know. So yeah, I just I feel like I need to be British royalty if I'm calling it pecan pie.

Producer:
Right. Well, I'm just fancy like that, I guess. Well, you know, I mean, here's the thing. Call it a pecan and call it a pecan, whatever you want to call it. Just just put it in the pie.

Mike Zaino:
And no doubt. And it tastes good.

Producer:
Yes. Yes, it does. Oh, my goodness. But we got a lot of great stuff coming up here on the show today. I'm going to go over a little bit of that coming up here in just a moment. I did want to mention, though, first this this is not food talk with Mike. This is Money Matters with Mike. The website as a result is MoneyMattersWithMike.com and you can go there for all of the past episodes of the show. You can subscribe to the podcast version wherever you get your podcasts and you can also reach out to Mike at 704 560 1573. Stick with us. We'll say the number a few more times during the show and we'll give you plenty of reasons to call as well as we go on through. And we love hearing from you. So reach out any of those those ways that you can. And before we get too deep into the proceedings here today, Mike wanted to send out to our listeners a little bit of a reminder, just a few more days, really. It's down to the wire for Medicare's annual enrollment period.

Mike Zaino:
Yeah, that's right. Medicare is AEP, which is the annual enrollment period, ends next Wednesday, December 7th. So that's less than one week that remains in this year's enrollment period. So if there is any way that I can help you navigate those choppy waters that is known as Medicare, whether you are new to Medicare or whether you just want to kind of look and see what other options may be available for you, don't hesitate to give me a call today. Ask me any question that you have with regard to Medicare. I'll be happy to help you. Another really, really important reminder that I have is that today you may have tuned in expecting to hear a different show. And we used to air at 12 noon and we have been moved to the 9 a.m. slot. So if you're listening to me for the first time, I thank you very much. I hope you'll you'll recognize that the goal of this show, like I said, is to arm you with useful information and you won't tune out, in fact, if you know anybody else. That hasn't listened to this show, please invite them as well. So those are two very, very important announcements that we at Money Matters with Mike wanted to make.

Producer:
Yeah, absolutely true. And we love the new time slot here. Really appreciate that opportunity. And getting some new ears on the show is always a great, great thing. And speaking of all that great information that we share with the folks here, Mike, we got a lot of it coming up. We're going to share our quote of the week here in just a second. We've got I love it. We're kind of going back and forth. Okay. Do we want to call these maybe like New Year's resolutions or something that that we can, you know, give to the listeners like going into the new year, But we're just like maybe just a little bit too far from the New Year to do that. So we're actually going to call it the 12 days of Christmas, like the 12 days of Christmas money, maybe something like that. I don't know. But that's it's a working title, work in progress.

Mike Zaino:
It absolutely is.

Producer:
We're going to go through that. We'll talk about what retirees fear the most. And I bet if you're a retiree pre-retiree, you can probably you know, you probably have that fear. So you probably know what we're talking about before we even get there, we'll have our cost cutter of the week. Plenty of great stuff coming up as well. But as promised, here first is our Quote of the week.

Producer:
And now for some financial wisdom, it's time for the Quote of the Week.

Producer:
And those very words of wisdom this week come from a guy named Dave Ramsey who knows a thing or two about money and shares that wisdom with us through this quote. And he said one time, you must gain control over your money or the lack of it will forever control you. And when I first read that quote, Mike, I literally I'm like, oh, that that's been my financial life for a good chunk of my adulthood, specifically my twenties, and like the first half of my thirties. That was that was me.

Mike Zaino:
Yeah. It's hard because so many people are a slave to money and they trade their their time for money and they don't really have an idea or have the base knowledge of how to break that cycle and utilize money as a tool and actually get control of that tool. You know, when I talk about getting control of a tool, I remember the first time I ever when I was a kid tried to use a circular saw on a piece of wood and it started bucking back and man, I got scared. Like I really got scared and jumped away from it and just let it fall. And my grandfather started just cracking up laughing. Right. And I didn't know how to use the tool. And so, you know, again, when we talk about not letting money control you and not being a slave to money, I think those are very, very powerful words. Which leads me into this week's Meat on the Bone segment.

Producer:
Hungry for something that you on? Here's some meat on the bone.

Mike Zaino:
You know, we did battle back and forth on we calling it New Year's resolutions that we can help you keep. Are we going to call it the 12 Days of Christmas? I kind of like that because we're right before Christmas, but I'm not singing the song. Okay.

Producer:
Oh, see, that's that's what I was looking forward to.

Mike Zaino:
Yeah, on the. No, not happening. Okay. It's a fun one. I especially like the what was the parody one that was done by the two Canadian ones? You know which one I'm talking about.

Producer:
Oh, yeah. And then, well, you know what? I actually like the the Muppets one too, was I thought that one was fun. Yeah. With Miss Piggy singing The Five Golden Rings part. That's hilarious.

Mike Zaino:
No doubt. Well, you know, on the first day of Christmas, you want to calculate your net worth, you really need to know where you stand and any changes that you need to make become more obvious. After you do a calculation, you should start by totaling all of your assets. And what are your assets? Those are your account balances and your checking and savings accounts, your money market accounts, your investment accounts, your real estate, basically anything of value, and then you subtract your liabilities. So that's debt that you owe could be mortgaged, debt could be credit card debt, it can be personal loans, student loans, anything that you owe. And the result when you take out your liabilities from your assets is going to net the clearer picture of your net worth. So that is very, very important on the first day of Christmas that you understand where you stand from a net worth perspective, right?

Producer:
Man Yeah. And, you know, I mean, it's really important because you can have this idea of, okay, I want to whatever this financial goal is, I want to I want to get out of debt. I want to pay this thing off. I want to be in good shape for my retirement. I want to do this, that and the other. But if you don't know where you are, first of all, you can't really know where you're going, where you want to go. You got you got to know where you are currently and then start mapping out the way to get to those goals.

Mike Zaino:
Even Google Maps requires that you put in a starting point before you get to destination, Right? All right. On the second day of Christmas, I want you to check up on all of your retirement accounts and be sure to take advantage of any contribution matches that may be offered within your employer's retirement plan. So if if they'll match you up to 3% or 5% or heck, if they match more and you're not taking advantage of that, basically what you're saying is, nah, I don't want free money, which makes absolutely no sense. Right. If you are listening today and you're 50 years or older, you can contribute an additional $7,000 a year on top of your employer sponsored plan to an IRA and 7000 a year is is only $583 a month. If you're able to do that, if you're self employed, get in touch with me about setting up and contributing to a Sep IRA, which is basically a self employed pension. So on the second day of Christmas, you want to check up on those retirement accounts and make sure that you are contributing what you should be contributing.

Producer:
Yeah. You know, it's funny because I know that I have in different jobs that I've had over the past. I've been like OC the 401k or whatever plan is. It's set up. I set up my contributions years ago when I started the job. Great, grand, wonderful. It's like the old the the old infomercial said, set it and forget it, you know. But it's it's something, though, that you don't want to set and forget. You want to check up on it on a pretty regular basis. Make sure that that everything that's there really makes sense and that you're taking advantage of all of the different things that you can take advantage of.

Mike Zaino:
At an absolute minimum, you should check up on all of your retirement accounts on an annual basis. Absolutely. That's the minimum time frame that you should allow to go by on the third day of Christmas. We want you to update your savings goals. Your savings goals. Just kind of how Matt alluded to are fluid, right? Things change over time. So you need to determine how much you plan to set aside each and every single month for your future. For an example, if you get a raise, if you're still working, you get a raise. If you're on Social Security. I know you're getting an 8.7% raise right then. Then you're already used to living off of the amount that you've been taking home prior to getting that raise. Why not put that toward investments that you have? Right. So update those saving goals. Warren Buffett, a pretty smart individual when it comes to investing. I think he's only the fifth wealthiest man on the planet says don't save what is left after spending, but instead spend what is left after saving. Makes sense.

Producer:
Matt Absolutely. It really, really does. And when you when you turn that on its head like that, you're like, oh, I really should make this a priority. And speaking of set it and forget it. We've talked about this before on the show, but with all those new ears on it in the new time slot, we should say it again, is that saving is something that you can set and forget? You can you can automate that process, right? You can you can say, okay, every time my direct deposit comes through, X amount of dollars is going to automatically go from my checking to my savings or from my checking to to whatever retirement account. Maybe if it's outside your bank, you can set up that kind of a transfer as well. So it can be a simple thing that you can set and forget, and that'll be doing that in a good way.

Mike Zaino:
Yeah, because when it's out of sight, it's out of mind. If you're not physically having to remove it from your wallet or your purse. Right. It's much less painful. On the fourth day of Christmas. We want you to invest beyond your 401. K, and even if it's as little as $50 a month, don't just rely on your 401 K or whatever other employer sponsored plan you might have, whether it's aa403b or if you're a federal employee, for an example, a thrift savings plan. Don't just rely on your employer Sponsors plan to help get you to the finish line. Remember, it is never a bad idea to save for retirement and your future self will Absolutely. Thank you for creating multiple pools or buckets of money to pull from in retirement. So whether you open up a brokerage account, an IRA, you purchase an annuity, try to invest above and beyond just your 401. K.

Producer:
Yeah, really smart advice there because, you know, as you say, you may look at it right now, as can I can I afford this? Am I, you know, sort of putting this money kind of into the ether and into an abstract thing? But no, you're paying yourself. I mean, and that's really what it's all about, is you are truly paying yourself here.

Mike Zaino:
That's it. And this kind of goes in with what I've said already. If you wait to pay yourself, if you pay all your bills first, you're not going to have any money left over, right. You absolutely have to pay yourself first. I said I wasn't going to sing, but I kind of got to sing on this one on the fifth day of Christmas. You must plan for taxes. Okay?

Producer:
And I love it. And the crowd goes wild.

Mike Zaino:
This is easier said than done, and it might require the help of a tax professional. We are not tax professionals. We know enough to be dangerous, but we are definitely not giving tax advice. But it is absolutely necessary if you want to avoid paying Uncle Sam more in taxes, take for an example that you want to take a distribution from one of your retirement accounts this year. If you take it this year, that's going to count as ordinary income and may impact the amount of money that you pay in taxes, not only on that distribution but on your regular earned income. It might be wiser just to wait a few weeks until the calendar. Or flips into 2023, especially if you plan on retiring at the end of this year and you won't have earned income next year to go ahead and take that distribution in 2023. Another way to plan for taxes is to contribute to a Roth IRA, or if your employer author offers a Roth version of whatever 400 1k403p tsp, then definitely contribute to the Roth because you're getting those taxes paid up front and you won't have to worry about future tax hikes. In 1960s. For an example, the 24% tax bracket was at 56%. And Americans have a short memory. Those of you who are listening and may be in the Gen X or boomer age generation, you aren't really paying attention to taxes back in the sixties. So yeah, you might also consider opening up what's called an indexed universal life insurance policy just to be able to create a guaranteed tax free lifetime income stream in retirement. Just remember that the Roth IRA and believe it or not, life insurance are the only two vehicles available that allow you to draw tax free money in retirement.

Producer:
Very true. And I think a lot of people, if they know about the Roth, I think a lot of people don't even really know about the Roth and exactly what it is. They'll hear the term, but they won't necessarily be able to define it. But if they do know about the Roth, they might overlook life insurance. They might just think death insurance. And I know we'll talk a little bit more about that coming up. But it's it's something that's very important to not ignore because it's not just death insurance.

Mike Zaino:
Not not at all, Matt. Not at all. On the sixth day of Christmas, we want you to make a plan to pay off your debt, decide how much you can pay towards any loans, any debts, mortgage accounts, whatever. Consider paying extra principal towards your mortgage payment each and every month because by doing so, what you're doing is earning a risk free return on that money that's equal to your mortgage interest rate, and that'll enable you to cut down also on the number of years that it will take to pay off your mortgage. Don't pay the minimum payment on your debts, pay more. That's the that's what we want you to do on the sixth day of Christmas.

Producer:
A good idea not only on the sixth day of Christmas, but any time really to have that plan. This is what we have determined now in our first few days of Christmas where we stand and now this is that planning stage and mapping out like you made the Google Maps illustration a little bit ago. This is that that little blue line that shows you where you're going to go and making that plan, having it in place to pay off those debts, get out of debt as much as you're able. Boy, that frees you up so, so much and gives you peace of mind and a lot more financial stability.

Mike Zaino:
No doubt. No doubt. So on the seventh day of Christmas, we want you absolutely to make sure that you are building, if you don't already have and are adding to an emergency fund, the last thing that you want in retirement is for an emergency to derail your investment savings. Make sure that you have at least six months worth of expenses just set aside in case something pops up like it always does. Matt Whether it's a burst water heater, an unexpected hospital expense or your heat pump goes out as it's being stressed by the cooler weather.

Producer:
Yeah, that's one really that hits home for me because, you know, back in 2008, 2009, when the financial crisis was going on and companies were really struggling actually early 2009 got laid off from a job. And, you know, I didn't see that coming. Nobody really ever sees those things coming. And as a matter of fact, I've thought through basically all of 2008, boy, I've been lucky, you know, to not have been laid off. And I really was. Then comes early 2009 and I get laid off so so that things do happen. And luckily for me, I got I got a decent severance package, but it wasn't full pay of what I was making before. Right. So you do have to be prepared for those things, those emergencies, whether it's something like being laid off from a job or whether it's a medical emergency, something that that happens out of the blue, that is what it's for.

Mike Zaino:
That is exactly that's exactly what what it is for. And when you mentioned layoffs, there are companies now that are laying off left, right and center. I mean, thousands and thousands of people are without jobs heading into the holidays in the new year. And that's a scary predicament if you're not prepared for it. So that's why it's imperative that you have that emergency fund that's only break in case of emergency. You're not dipping into that to to to go buy McDonald's Happy Meal. And that's not what that's for on the eighth day of Christmas. We want. You to rebalance your portfolio. The stock market always has its ups and downs. Some sectors overperform, some sectors underperform. So far, 2022 has been pretty grim for most of them. And by rebalancing your portfolio to its original or updated asset allocation, what you're doing is taking steps to lock in gains from the sectors with the best returns and then turn around and purchase shares in the sectors that have lagged behind. So think about this. When you first started investing, you may have had a risk profile that had you 80% in equities and maybe 20% in safety. Well, the older you get now, you've got much more money invested. And if you're close to retirement, the last thing you want to be is 80% at risk. So that's why it's important to rebalance your portfolio, rather. And as a tip, if you rebalance your portfolio with a broker, they're likely going to charge you as high as five and one half percent to do this. And this is not a fee efficient strategy. On this show, we talk a lot about being fee efficient, tax efficient and market efficient. We recommend that you work with someone who has your best interests in mind and looks to save you money, not lose more of it. So rebalance your portfolio.

Producer:
And don't spend more than you have to at all. That's, you know, cut down those fees and you'll be you'll be a happy camper.

Mike Zaino:
You will. And Matt, you just you gave me the intro into my ninth day of Christmas by paying down your credit cards. You just said don't spend more than you have to. So America is the land of instant gratification. And most people use credit cards because they can't afford to buy what they're putting on. Plastic don't carry a big balance on your credit cards that have high annual percentage rate interests. No one has ever become rich off of airline miles and hotel points. Make it a goal to pay off that balance each and every month. And if you can do that, that means you can actually afford what you're purchasing. Also, a credit card should not be your emergency fund. Make sure that you have those six months of expenses set aside for those unforeseen emergencies like we just discussed. Pay down your credit cards, people.

Producer:
Yeah, absolutely. And it's so important because you get into a situation where if you carry those high balances, you've got that compounding interest because that interest charge then becomes part of the balance. And then on that interest, you pay interest. And then if that's that revolving credit and it just snowballs and you can be in a bad situation pretty quickly.

Mike Zaino:
Really, really fast. In fact, you know, a few years back, they weren't required to disclose how long it would take if you just paid the minimum payment to pay it off. And I did the math and that if you had the highest interest rate allowable by law and you only had an $1,000 balance and you just paid the minimum payment, it would take you 18 years. Matt 18 years to pay off a $1,000 balance. How ridiculous is that? You're not making yourself rich by doing that. You're making the credit card companies rich, so please pay off those credit cards if at all possible. On the 10th day of Christmas. I want you to review your credit report. All right? Make sure that you check your credit report regularly and take steps to repair any negative aspects. I can speak from personal experience on this. I have multiple credit monitoring services because I'm extremely protective of my credit. I think you'll find that anybody who makes money, they are extremely protective of their credit. Well, I noticed I got an alert that my score had dropped by 92 points.

Mike Zaino:
I'm like, well, the heck. Right? So immediately I went on there and there was a collection on my account that should not have been put there. And I'm like, Whoa, what is this? I contacted the people and they're like, You owe this. I'm like, No, I don't. And I filed a dispute and it took them less than a month and they had that deleted from my credit account. What? And if I hadn't taken any action, I mean, think about that. I had over an 800 score that went down into the low seven hundreds. And I'm like most a lot of people would say, Hey, low 700 is still good. No, it's not. Not when you're over 800 and and for something that wasn't my fault. So the fact that I had the credit monitoring service that sent me a text message said there's been a change in your in your credit rating was what alerted me to it. There is no excuse no excuse whatsoever for not reviewing this important information because errors are not uncommon. They're not.

Producer:
And it's absolutely free to do it, too. So so take advantage of that. You know, you've got the. Websites like FreeCreditReport.com and the others where you can go and and take a look at your credit report and make sure that you're looking at the report itself, not just at your credit score. The score is important. It gives you that sort of top line big idea of where your credit stands. But just like you said, Mike, if you if there's a mistake in there that could cost you big time. Those those fluctuations of a couple of points here or there, those are normal and to be expected. But something like 92 points or whatever it was, that's insane.

Mike Zaino:
I gave me a heart attack when I saw it. I'm like, Thank God I didn't need to buy a house, you know, in the next couple of weeks or I wasn't going to go try to purchase a car and get Tier one rating because I wouldn't have gotten it, not with not with the low seven months. Right. You need to be 40 or above to get tier one rating on the 11th day of Christmas. We absolutely must review life insurance needs. And people think maybe scoffing and rolling their eyes at this. But if somebody will suffer from a financial standpoint, if you drop dead, then you need life insurance. And as you move through your career, those life insurance and disability insurance needs are going to continue to change. So just give some thought as to how much protection you actually need. And then you might consider investing in what's called an indexed universal life insurance policy if you're still in your forties or fifties, because these types of policies are one of the only ways to generate truly tax free retirement income in retirement.

Producer:
Yeah, and that's where people and I sort of alluded to this a little bit ago where people are like, wait, life insurance can benefit me while I'm still alive. Like, it's a new concept to a lot of folks, but it's, you know, these types of policies are fairly new. They've been around for a while now, though, and people don't need to just think about, oh, it pays the pays a death benefit if I die, which it still does, of course, because that's sort of the main feature of most life insurance policies, obviously. But it can also benefit you while you're still alive. It's life insurance for the living. It's kind of a crazy thing.

Mike Zaino:
It is. So if you're out there listening and you have a life insurance policy that you've had for more than ten years, you might have the old school insurance. And we do complimentary reviews for you just to see if it would make sense to put you into a new school insurance policy that protects you if you die too soon with the death benefit protects you if you live too long with the guaranteed income for life rider that we can place on there, or if you get sick in the middle because your death benefit can actually be used if you're ever diagnosed with a chronic critical or terminal illness. So again, many multiple uses for life insurance and we want you to review your needs. And on the 12th and final day of Christmas, Matt, I want to make sure that everybody out there has a will created and has beneficiaries designated because if you have a will and you have a policy of some sort that has beneficiaries on it, guess which one is the more super seating when it comes to distribution of of wealth? It's not the will, it's the beneficiaries. So even if you have two kids, Billy and Bobby and you want in your will, you said Bobby gets it. But your life insurance policy, for example, has Billy as as the beneficiary because Bobby wasn't born when you took it out, Then guess who's getting it? Billy's getting it.

Mike Zaino:
It's not being split. And if Billy really wants to be a jerk and not be a Bobby half, then that's totally legal. So make sure that your beneficiaries are up to date and make sure that you have a will in place, because an unexpected death can be absolutely devastating for a person's surviving family members. And a will provides your loved ones with peace of mind. Not having a will leaves them with no guidance as to your wishes and could just add to their burdens. And this can lead to stress and tensions that affect families long after they deal with the grief of your loss. C Without a will, your property and your surviving family's affairs are going to be governed by the choices reflected in the statute law of the states of either North or South Carolina. If you're listening to this locally or wherever you reside, if you're listening to this on podcasts and those choices may not be your choices, right? So that's why it's important to have your ducks in a row and make sure that you have all your beneficiaries updated. But beyond that, you have a will that that expressly has states your wishes upon your demise. So the 12th day of Christmas, make sure that you've got a will created.

Producer:
A very important thing there, the 11th and 12th really important for not only you, but for your family, for your loved ones as well, because after you're gone, your wishes need to be known and you're been. Fisheries need to be named. So, so, so important there. And really, I think, Mike, the the bottom line here is that there are so many different aspects to people's financial lives and situation. I know I can't navigate it all by myself. I know that's just true for me. But I think this is this is my personal, personal opinion alert here that they should give somebody named Mike Zaino a call at 704 560 1573. really go over all of this. Right. I mean it's it can be a complicated thing and getting professional help wading through it all I think is is super important.

Mike Zaino:
You know get in touch with me so I can help you build and navigate your financial plan. All right. When it comes to something as important as your money, I want to provide you or you and a spouse, a one on one opportunity to ask questions about your specific situation. Give your money the attention that it deserves and needs in order for it to grow for your future. Listen, folks, if you are in what I call the retirement red zone, meaning that you plan on retiring in the next five years or you have just retired within the past five years, Please give me a call so that I can help strengthen your financial plan. I want to help retirees currently in that red zone to manage what's called their sequence of returns risk because you can't afford to lose too much during those years, which means protection and growth is key. The bottom line is that the complimentary consultation is a full retirement consultation. I'm going to provide you this consultation at no cost and there is absolutely no obligation. You will only work with me if I can do better for you than where you currently sit. I'll discover exactly how much you're paying in fees. I'll help you cut any unnecessary costs in your IRAs, in your 401 KS or any other retirement savings accounts that you might have. And I can also help you with both Social Security planning and Medicare. So bottom line, again, pick up a phone, dial 704 560 1573 or visit the website Money Matters with Mike dot com. MoneyMattersWithMike.com All one word all spelled out and hit me up on the contact page. But the ball's in your court. You must take action.

Producer:
Yeah. And you and you mentioned Medicare there. And once again, if you are trying to plan for next year, if you want to review that coverage, if you haven't done it, if you've been putting it off, you've only got a few more days to do it. So yeah, definitely give me a call or go to the website. Once again it's MoneyMattersWithMike.com. Well, you know Mike, we've been talking a lot about Christmas today because we've been covering those sort of 12 days of Christmas and money advice and some tips to to do on those 12 days of Christmas here. But I want to sort of flash back a little bit to Halloween. Spooky, spooky times, because we're going to talk about a big fear right now that retirees have. And I think the biggest fear, as a matter of fact, according to several surveys that we've seen here and we've talked about, is that the biggest fear for retirees, even more than death itself is running out of money. Right? I mean, it's a huge, huge thing.

Mike Zaino:
And nobody wants to live broke. And a lot of people say, well, you know, I'm not going to live that long. Right. And nobody in your family may have lived to 85 and then happy birthday. You're 86 and broke. Okay. Right. It's just not the idea that we have when we think of our golden years, we think of our golden years as being able to enjoy retirement. And so if if you're relatively healthy, I mean, come on, as we age, our bodies are going to break down some. So we're all going to have aches and pains. Right. But if you're relatively healthy, you might ask yourself, how could it happen to hardworking Americans that that I have a potential to actually run out of money? Well, Social Security cutbacks could be one reason. Did you know that in 1940 there were 40 workers contributing per retiree withdrawing from the Social Security system? Well, today there are only three workers per retiree, and this ratio is expected to become 2 to 1 by the year 2050. So although you guys are getting an 8.7 cost of percent cost of living adjustment here in the new year, we don't know that Social Security is viable as it currently stands. The last report that I received personally said that it was going to be able to meet 70% of its obligation in the year 2034. Well, 2034 in one month is only 11 years away.

Mike Zaino:
So something has to change. Whether they're going to cut back on the percentages that they're paying out, whether they're going to move the needle on the eligibility. But you can't depend on Social Security as as a main portion of your retirement. You shouldn't depend on Social Security, not when you can take other steps well before you reach Social Security eligibility age. That would enable you to have a plan, a contingency plan in case Social Security doesn't exist as it currently does, as opposed to relying on it. And then it's not there. What about tax increases, Matt? Historically, tax rates are lower than they used to be. In fact, I think we're in the fourth lowest marginal overall tax rate in the history of our country. So while we gripe and we play and complain and yes, I'm one of those people who gripes and complains about having to pay taxes. We're actually in a historically low tax environment. I mentioned this earlier today as far as back in the sixties, where the current 24% tax bracket used to be 56% with increasing national debt, with government spending, many experts believe that taxes are going to have to go up in order to meet the nation's budget requirements. So, Matt, if I asked you, hey, do you think taxes are going up or down in the future, what are you going to say?

Producer:
I would say taxes are most likely pretty definitely going up at some point in the future.

Mike Zaino:
And nobody's ever, ever answered. Mike I think they're going down.

Producer:
Yeah, yeah. No, not from here. It's like when you mention, though, you put it in perspective and you say, okay, this is we're at historically low tax rates. You pretty much have nowhere to go but up. And that's scary for people who are approaching retirement. They say, Wait, wait a minute, hold on. I've been enjoying this tax rate. Well, not necessarily enjoying it because nobody enjoys paying taxes. But I have been, quote unquote, enjoying this tax rate. And now you're going to charge me more just as I get to retirement.

Mike Zaino:
Yeah, Yeah, it's true. And people have that that misnomer that they are going to be in a lower tax bracket when they retire because they won't have as much earned income while not having as much earned income is true. What if they raise the taxes? Then you're paying the exact same amount of taxes that you were while you were working. Right? So, I mean, it's something to be very, very aware of. And there are steps you can take to prepare yourself, to not have to be dependent upon what the government does when it comes to taxes. Another thing that will absolutely erode your retirement savings and we've been experiencing it big time this year is inflation. Cost of living adjustments this year and last year. So over the past two years have reflected a 14.6% inflation over those two years. Matt That is huge. And that's by the current way of calculating it. Some experts believe that the true inflation rate has been much, much higher for this year alone. I saw the true inflation at around 17%. So when you combine this year and last year, you're looking at a number that's astronomical, right?

Producer:
Yeah, 100%. And well, I say 100%. It hasn't been 100% inflation. No, no, Lord. Poor choice of words there. But. But absolutely has been higher in a real way because, you know, in that sort of core inflation number, they will not include the more volatile categories of of goods and services. Right. So especially goods like energy costs and things like that. So we know what's happened to energy costs over the last year or two. And so if you were to include that alone, that's going to really jack things up.

Mike Zaino:
Yeah. And another way, Matt, that Americans can run out of money in retirement is if their portfolios just have to rapid decline, they go down too quickly, see the sequence of returns risk that that's a risk that that speaks to your first years in retirement especially where if you're withdrawing money from your retirement portfolio and the market is declining, guess what? Your money will never last as long as you planned on it. Lasting. Because I do this in all of the seminars that I do when I when I do educational workshops. Right. I ask people if you have $100 and you lose 50%, how much money do you have? And everybody says $50. And I said, Then you get your 50% back. How much money do you have? And the majority of the room, Matt says, $100. And I'm like, No, no, no. Och, you only have $75 because you're getting 50% of the remaining $50, which is only 25. So if you experience a 50% loss in your portfolio, you actually have to gain 100% just to get back to even. And Matt, gaining 100% takes time. And people who are in that retirement red zone, they don't have the luxury of time. So preservation of assets is key is fundamental in order to fund a long term retirement.

Producer:
Yeah. And it's good that, you know, you put it in those terms because I think that really brings it home for people and illustrates the the seriousness of that. And especially, you know, in a time like this where we've seen such volatility in the markets and all, you know, people are really concerned about those types of of losses. And if you don't if you're if you are in that retirement red zone, like you say, you don't necessarily have the time that it would take to recoup that loss. So it's something to be aware of.

Mike Zaino:
Absolutely. Matt. And market crashes are another thing that you need to be aware of. You might want to consider reducing the risk that you're taking in your current portfolio. All right. Did you know that from 2000 to 2002, when we're talking about the market, we're mostly referring to the S&P 500? Those three years saw three straight years of declines. In 2000, the market dropped 9.1%. In 2001, the market dropped 11.9%. And then in 2002, they were really walloped at 22.1%. So, again, imagine you've just retired and your money is in a portfolio where it's at risk and you take three straight years of declines. Again, you will never recuperate that loss. You just don't have enough time.

Producer:
Now it's huge. And then, of course, you know, you have years like 2008 when the market lost 37% in that that particular calendar year. You know, in 2018, there was sort of the the kind of flash crash, I guess you could call it, where year over year it was for four and one half percent almost loss. And then this year, you know, we've seen times where the S&P has been down 20, 25% at some at some points. It has bounced back, recovered somewhat since those lows. But we're still as of the time that we gathered these numbers a few days back.

Mike Zaino:
17.

Producer:
About 17%. Yeah, it's kind of crazy.

Mike Zaino:
Yeah, it's nuts. And something else Matt, to be aware of is the rising cost of health care. You know, running out of money is number one. Second, fear is running the rising cost of health care. Between prescriptions, common procedures, a potential long term care expenses. A couple that retires in 2022 may need to spend upwards of 315,000 just on health care alone in their retirement. So people might be looking at themselves going, I don't we don't even have 315,000. That's my point, folks. You need to get with somebody who can help you navigate these waters and put protections in place, because guess what? We're talking about some things that could be catastrophic to you, your family and your your heirs to come if you just took a little bit of time to sit down with me, I can show you things to position yourselves so that it's not catastrophic. Right. And imagine having to care for a loved one. This is a big this is a big one. And again, personal experience. I have a family member that that that went in for a surgery a couple of months ago and the surgery got an infection and they had to redo the surgery. And then that didn't take and they had to take the hip out and they had to like it's like six, seven surgeries down the road. And now it's requiring long term care facilities. Retirees who have to care for a dependent parent or child are going to have to deal with additional monthly expenses to help look out for that stuff, because there's going to be a time where you're not going to be able to do it yourself, and you're going to have to have a licensed professional to do that.

Mike Zaino:
And there are very few facilities that have that kind of skilled nursing on staff. And guess what? That costs money and a lot of it. So, you know, these are all things that can be addressed if you are smart enough to take charge of the rest of your life. And I know for folks that are in their twenties and thirties, it's really hard to look at, hey, what's going to be happening in four decades from now? Heck, you haven't even lived that long. Right? But I think, Matt, as most people enter into their forties, especially once they get in their fifties and they're starting to see their parents go through some of those aches and pains and financial decision-making times that I think it's just a light bulb should go off because the earlier you in age that you address these needs, the less it's going to cost you and the more impact it can have later in life during those retirement years so that you're spending less of your hard earned money reacting because you took time to actually prepare.

Producer:
Now, if you are hearing this and you all of the potential ways that you could lose money in retirement are just sort of overwhelming to you. And you want to hedge against that plan for that and make sure that that does not happen. A good thing for you to do. A great thing for you to do is to call Mike Zaino at 704 560 1573. That's 704 560 1573. It rings right there in his pocket and he will answer. Or if he's busy and does not answer immediately, he will get back to you. I can say that for sure.

Mike Zaino:
And the reason that I'm holding up the phone is again, we have a new audience. This is the 9:00 hour OC. I give out my personal cell phone number. It's the only telephone number that I've had since 1997. That should tell you something, folks. Millions of people and I do mean millions of people have my personal cell phone number. I answer my phone. My wife says I have no boundaries because I answered on the weekends. I answer it in the evening time. One time earlier this year during March Madness, my phone rang at 11:47 at night and I answered it and there was silence on the other line. And I'm like, Hello? And I could see who was calling me. I was like, Bob. And he's like, I didn't expect you to answer. I said, Then would you call me for like, I just thought I was going to leave you a message. I'm like, That's the kind of person I am. That's the kind of person that you'd be dealing with is somebody that really just wants to help overall. So pick up a phone and give me a shout.

Producer:
Absolutely do that. And you can also go to the website MoneyMattersWithMike.com

Producer:
Here's the cost cutter of the week.

Producer:
So with inflation being what it is, market volatility being what it is, you know you want to protect your money you know you want to save some and we like to help you along in that process. And one of the ways we like to do that is through our cost cutter of the week here. And this time around, Mike is talking about your mortgage and specifically paying off that mortgage completely.

Mike Zaino:
It is, Matt. The happiest people who meet with me for their annual reviews are the ones who have paid off their home. If you have to pay a monthly mortgage during retirement, it can absorb the entirety of one or two of your Social Security incomes for a married couple, or take almost an entire single person's monthly Social Security benefit. So I will strongly encourage all of our prospects and clients out there to pay off their mortgages in a smart way. That said, avoid paying off the family home with money from an IRA because you're going to owe the taxes on the money withdrawn. And remember this you wouldn't pay 20% commission to a real estate agent. All right. So you don't want to have to pay 20% in taxes when you pay off the mortgage on your primary residence by taking it from an IRA. So I encourage you to use money in your investment accounts to withdraw cash value from life insurance plans or savings accounts. You can also consider selling art collectibles if you have extra vehicles or separate pieces of real estate to raise those funds necessary to help pay off your your family home. The tax burden on the sale of those types of investments is minimal to zero, and housing is among the biggest costs that retirees face. And so eliminating your mortgage removes a sizable monthly bill from your retirement expenses. You will still need to pay your property taxes and your maintenance costs for your home, but that will be significantly less than your mortgage payment. It should be at least.

Producer:
Yeah, it absolutely should. And that's so great and such a burden to be lifted off if you can can make that happen. Just imagine having all that money back in your back in your pocket every month. That's just sounds fantastic to me. So that's a great cost cutting idea there for our cost cutter segment. Well, you know, we talked to I mentioned the bond market and all of the volatility in all of the markets. But then, of course, in the bonds they've been suffering along with stocks, which has kind of been the opposite of what we had seen historically. So it's kind of been a strange year. So a lot of people considering bond replacement. What we want to do right now is play actually a chapter from the book Annuity 360. This is Ford Stokes, the author reading a chapter from the book. And it's just a couple of minutes here but a lot of great information Bond replacement with fixed indexed annuities. Listen to this here folks. A lot of great stuff to learn. And Mike and I will wrap things up after this on the other side.

Ford Stokes:
Chapter 15. Bond replacement with fixed indexed annuities. Big idea. Historically, bonds have seen volatility when the market is volatile. Fixed indexed annuities are not subject to the same volatility, which makes them a much safer investment. You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. Am I firm active wealth management? We believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We'll talk about some reasons why you should consider replacing your bonds with annuities. First, here's some information on the history of bonds in the United States. Historical bond volatility. The 1900s saw two secular bear and bull markets in US. Fixed income inflation peaked at the end of World War One and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The US government kept bond yields artificially low until 1951. The long term bond yields were at 1.9% in 1951. They climbed to nearly 15% in 1981. In the 1970s, globalization had a huge impact on bond markets. New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created.

Ford Stokes:
Early investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market coming into the 21st century. Long term bond yields declined from a high of 15% to 7% by the end of the century. The bull market in bonds showed continued strength in the early 21st century, but there is no guarantee with our current market volatility that this will hold. See Chart 15.1 To see the incredible difference of investing in a fixed index annuity versus investing in bonds. Why you should consider replacing your bonds with annuities. The first question you should ask yourself is this Why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history of loan, you can see how uncertain the future of bonds is. Inflation and fluctuating interest rates play a big role in bond yields. Interest rate, risk of bonds, bonds and interest rates have an inverse relationship. When interest rates fall, bond prices rise due to the COVID 19 pandemic. Investors have moved their money to bonds because they believe it is a safer investment option. However, this has caused bond yields to fall to all time lows as of May 24, 2020. The ten year Treasury note was yielding 0.64%, and the 30 year Treasury bond was at 1.27%.

Ford Stokes:
Reinvestment risk of Bonds. This is the likelihood that an investment's cash flows will earn less in a new security. For example, an investor buys a ten year, $100,000 Treasury note with an interest rate of 6%. They expect it to earn 6000 a year At the end of the term, interest rates are 4%. If the investor buys another ten year note, they will earn 4000 instead of 6000 annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic market risk. This refers to the risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic Market Risk. This type of risk is unique to a specific company or industry similar to systematic market risk. It is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that contribute to company specific risk business risk.

Ford Stokes:
There are two types of risk, internal and external. Internal refers to operational efficiency. An external would be similar to the FDA banning a specific drug that the company sells. Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying. Bond dealers collect commission on bonds they sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of how much commission you were. Actually paying Standard and Poor's estimates of bond markups is 0.85% of the value for corporate bonds and 1.21% for municipal bonds. However, markups can be as high as 5%, up to $50 per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time, unlike an annuity which provides income for life. You must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss, as we discussed above. Annuities will provide you with an income you can never outlive.

Producer:
So that was a chapter from annuity 360 read by the author Ford Stokes Bond replacement with fixed indexed annuities.

Mike Zaino:
Mike Absolutely. And some of those benefits, again, just to make a huge point number one, 100% principal protection, meaning that you can never do worse than zero. You get market gains without market risk. You only participate of the gains of an index. You can structure it so you have an income that you can never outlive and have no fees. While doing so you still have liquidity if you need it. People are often concerned about tying up their money. Well, this the ones that we use, have liquidity built in and it allows you to grow your money, tax deferred and some products even offer bonuses. Guys and gals out there in listener land. If you're interested in reading the book annuity 360, give us a call at 704 560 1573 and I'll get you your free copy. Thank you so much for listening. Without you, we don't have a show. I hope you have a great rest of the weekend and as always, make it a great day.

Producer:
Thanks for listening to Money Matters with Mike. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money to schedule your free no-obligation consultation visit MoneyMattersWithMike.com Or pick up the phone and call 704 560 1573.

Producer:
Not affiliated with the United States government, Mike Zaino does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks on the property of the respective owners. AmeriLife assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as-is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

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